Isn’t this reversing cause and effect? Corporations are able to raise prices because consumers are willing to pay higher prices. Corporations always want to make as much profit as they can. If consumers can pay more, you get inflation.
Competition should drive down prices even if consumers have deep pockets.
This suggests that the US market has gotten less competitive. I wonder how much it has to do with ownership of competing firms by a few large index funds with concentrated voting power.
Don't forget supply and demand works on the capital side of the equation too, higher inflation means shareholders push for higher profits in the same way that high inflation causes workers to push for higher wages.
There's increasing supply of investments at higher rate of return, bond yields are close to 4% which means riskier investments need to pay more to compete.
mitthrowaway2|2 years ago
This suggests that the US market has gotten less competitive. I wonder how much it has to do with ownership of competing firms by a few large index funds with concentrated voting power.
rossriley|2 years ago
There's increasing supply of investments at higher rate of return, bond yields are close to 4% which means riskier investments need to pay more to compete.
baryphonic|2 years ago
[0]https://en.m.wikipedia.org/wiki/Demand-pull_inflation